Sunday, December 13, 2009

Summing up 2009, looking ahead at 2010

As the year is coming to an end, I would like to look at the three consoles and assess their current situation, while looking ahead at their potential performance in 2010.

The Wii is still the runaway success of this generation, but Nintendo obviously has the most to lose from this point on. Astonishingly, some Wii first party titles have remained among the top sellers across all platforms for years. ´Mario Kart´ and ´Wii Fit´ sold as much as ´Grand Theft Auto IV´ in 2008 and are among a total of five Wii titles in this year's top ten sellers in the US so far.

As far as a slowdown in hardware sales is concerned, some observers have overstated the case, I believe. Of course, when comparing sales this year to 2008, the numbers have indeed slowed down significantly. The price cut is the best proof of that. Companies only ever cut the price when the product is not selling. That was true of the Xbox360 and PS3 as well as the Wii. But NPD analyst Anita Frazier recently pointed out how well the Wii is doing still.

While there has been a lot of focus on Wii sales as compared to last year, the system was still the best-selling console system by a margin of 54 per cent. (...)

At this same point in the PS2 lifecycle, the PS2 was down in unit sales by 23 per cent over the previous year, but as history has shown, it continues to have a great deal of life left in it. So focusing on a comparison to Wii's stellar 2008 performance masks the reality of just how well this system is selling.

A grand economic success of titles like ´The Conduit´, ´House of the Dead: Overkill´ or ´MadWorld´ will surely become examples the entire industry will follow. On the other hand, if these titles sell poorly, the Wii will get less and less mature titles and will become a casual console.

By now, it is quite clear that the latter scenario came true. All titles mentioned sold poorly or even abysmal, despite two of them being great games. So the Wii has failed as a platform for mature games by third parties, it must be said. And it is highly unlikely that this will change. In fact, I believe that Capcom may be regretting moving ´Monster Hunter Tri´ from a PS3 exclusive over to the Wii. The game is selling very well in Japan, but international sales are likely to disappoint as was the case with the games mentioned above. Of course, the Wii has become the console of choice for survival horror and Resident Evil fans alone cannot afford to be without ´Resident Evil 4 Wii Edition´, ´Resident Evil: The Umbrella Chronicles´ and ´Resident Evil: The Darkside Chronicles´. But we are still waiting for a decent shooter and a few other genres, notably RPGs, are also understaffed.

One, it's a very compelling platform. Two, third-parties can do a lot better on the platform with the right support from Nintendo. They've always been first-party-centric, and they're learning how to be third-party supportive.

My belief is the first platform to reach $149 is going to inherit much of that [PlayStation2] business. (...) The Wii is not gone. But if they maintain $199 and don't innovate, they're going to have a hard time competing with what's already been announced from Microsoft and Sony.

According to Games Industry, Riccitiello made the following remarks in the company's recent earnings call.

To be honest with you, I think the Wii platform has been a little weaker than we had certainly anticipated. And there is no lack of frustration to be doing that at precisely the time where we have the strongest third-party share. (...)

I think driving revenues up on that platform from where we already are, which is up substantially from where we were a year ago, we are reaching out to Nintendo to find ways to partner to push third-party software harder.

Wii is where we are missing it and so I really do think that the opportunity exists to find different ways to partner with first party in this case to sort of help establish in the minds of the consumer legitimacy of some of these other brands when they are going out multiplatform because very, very few multiplatform titles are succeeding on the Wii. (...)

I would point out, by the way, the 50 million number of course includes Asia or Japan and I don’t think any of the Western companies are likely to participate much at all on the Wii platform in Japan, so the addressable market we see is just a little bit below 40 million but that is still an important opportunity.

Fiscal Year To Date, EA is the #1 independent publisher on the Wii with share of 21% in North America and we estimate 14% in Europe – up 8 and 10 points, respectively. Our non-GAAP Wii revenue is up 50% year-over-year. While we have hit our share goal for the Wii business, revenue is well below expectations due to underperformance of the Wii platform.

The problem is clear. Being such a strong first party publisher, Nintendo itself made most of the money off of the Wii platform. Although it is the clear market leader and will likely remain at the top, Nintendo failed to mobilise third parties. So whatever successor Iwata and Miyamoto are planning, it will suffer from the very same problem.

In fact, a successor to the Wii will in itself be a grand challenge. Normally, companies innovate with one generation and consolidate with the next. At least, this is the way Nintendo has done it so far. With the Wii lagging so clearly behind the competition in terms of hardware power and the competition ramping up their own motion control systems, which will no doubt be perceived as more advanced when they hit the market, Nintendo cannot afford to consolidate.

Yet Sony has very little money to invest. The corporation has come under intense pressure this year to reduce the price of their PlayStation3. They finally did and sales soared. However, this means that Sony is still subsidizing each unit sold, according to market intelligence firm iSuppli.

Based on a dissection and analysis of the console, iSuppli has determined that the 120Gbyte Hard Disk Drive (HDD) version new PlayStation 3, released in September, carries a combined Bill of Materials (BOM) and manufacturing/test cost of $336.27. At a newly reduced retail price of $299, the latest version of the PlayStation 3 comes closer to breaking even than any previous version of the product.

Losing money on each hardware unit sold some three years after the product launch is probably unprecedented in this industry and it is, naturally, the economics of the madhouse. At the very least, it is a huge gamble for Sony. They are finally selling decent amounts. But will those sales figures be enough to convince third parties to commit to more exclusives and thus spur on sales even more?

Notable PS3 third party exclusives are: ´Agent´, ´Final Fantasy XIII Versus´ and ´Final Fantasy XIV Online´, ´Heavenly Sword´, ´Last Guardian´, ´Metal Gear Solid 4´, ´Ninja Gaiden Sigma´ series, ´Ridge Racer 7´ and ´Valkyria Chronicles´. This list is clearly dominated by titles which do well in Japan, but may not prove to be blockbusters in Europe or North America. As a counterweight to this, first and second party titles appear to come predominantly from the company's North American and European branches, SCEA and SCEE. Yet with the majority of PS3 third party titles also available on Xbox360, which is significantly cheaper and boasts a more impressive list of third party exclusives, the Xbox360 still looks like the better proposition.

I believe that motion control will be the deciding factor. If the PS3's ´Sphere´ can outshine the 360's ´Project Natal´, Sony has a chance to come second this generation. The launch portfolio and the marketing will decide which system buyers will see as the technological successor to the Wii. ´Sphere´ has the advantage that the technology has been around and has been tested by Sony for almost ten years. At the ECTS 2001 in London (before the launch of ´Eye Toy´ for the PS2), I played a technological predecessor to ´Sphere´. Colored swords and maces were simulated on-screen and in real-time. This was only ever used in marginal games like ´Eye Toy Hero´. But Sony sure has perfected this technology since. It is a slim chance (pun intended), but 2010 could yet become the year of the PS3.

It could all go wrong, however. Let us not forget that IBM discontinued the Cell chip line, after Sony had talked the chip up to be the ultimate CPU, soon to revolutionise not just personal and super computers but also household electronics. This decision has ramifications for a possible PS3 successor, or rather betrays Sony's future plans (because if Sony had planned for a Cell-based PS4, IBM would not have discontinued the chip line). It seems highly unlikely that such a device would have a Cell-based chip, which in turn spells a high research and development budget. Quite obviously, this is money Sony does not have and/or is unwilling to invest. So, the worst case scenario is Sony no longer planning a PlayStation4. As unlikely as this might be, it is certainly a possibility.

It seems that there is next to no news regarding the Xbox360 at this point in time. And this is good. Unlike with the Wii and PS3, no third party is complaining about the platform, no analyst is heralding an imminent doom and most gamers seem content, too. Everyone is happy with the console's performance, it seems. And there is every reason to be.

Third party support is arguably the best among the three. Exclusive games of note include ´Alan Wake´, ´Lost Odyssey´, ´Blue Dragon´, ´GTA IV DLC´, ´Dead Rising´, ´Beautiful Katamari´, ´Lost Planet´ (timed), ´Gears of War´ and ´Mass Effect´ series, ´Too Human´, ´Ninety-Nine Nights´ and ´Prey´ series, ´Splinter Cell: Conviction´, ´Ridge Racer 6´, ´Quake 4´, ´Left 4 Dead´ series and ´Dead or Alive 4´. Alongside Microsoft's own efforts concentrating heavily on family friendly gaming (albeit this is more evident in their marketing than in the actual software output), I believe the 360's portfolio to be the most balanced overall, particularly as traditional gaming (without motion control) is concerned.

Xbox 360 platform and PC game revenue decreased $161 million or 3%, primarily as a result of decreased revenue per Xbox 360 console due to price reductions during the past 12 months, partially offset by increased Xbox 360 console sales and increased Xbox Live revenue. We shipped 11.2 million Xbox 360 consoles during fiscal year 2009, compared with 8.7 million Xbox 360 consoles during fiscal year 2008. Foreign currency exchange rates accounted for a $74 million or one percentage point decrease in revenue.

It is fair to say that Microsoft bought its way into the home console business. But considering that the company has the financial stamina to continue investing in the project, this may yet turn out to be a worthwhile enterprise. I have always said that if Microsoft had known the full extent of the necessary investment, they would obviously never have entered the market. But now that they are in and seeing some success, they are here to stay.

Just like I noted above, Microsoft's fortune will greatly depend on the public perception of ´Project Natal´ as opposed to Sony's ´Sphere´. I see the Wii as unbeatabale in this generation, just like the analyst cited above. But Nintendo will lose reputation to either of the competing motion control technologies. And ´Project Natal´ has some very compelling features. No controller at all is a great proposition for everyone who does not want videogaming invading his living room and cluttering up the space. The downside of it is that it is not easily suited for all kinds of games. I do not see any chance of playing a shooter with ease. And even for racing games, I doubt that it will deliver the precision needed. That will not be too much of a disadvantage if a game like ´Milo´ can bring a new level of artificial intelligence and interaction to gamers. If done right, this game alone has the power to keep Microsoft ahead of Sony for the remainder of this generation.Sources: see aboveThanks to: Joystiq, Joystiq, Joystiq

46 comments:

regarding the wii, all i can tall you now.... told you so about more then a year ago.

let's face it, wii sales are still great, but there are NO GAMES for the damn thing.

and I just don't know who to blame now. the third parties with low game quality or nintendo for their laziness- games are long waited and we are getting mostly sequels now (like resort, fit+, galaxy 2, new smb.)

i mean... wtf??? and (again) where is RETRO? FACTOR 5? HAL? starfox?? f-zero? new pikmin? some info about zelda? anything?

is wii's fault THAT'S SO FAR OF REALITY IT ISN'T FUNNY the wii is at war with the i9ndustry

jeeeesssssssssss work it out

2010 year of wii and ds just like the last 3 years im in uk the ps3 slim isnt even marketed by retailers anymore its slipped into 3rd place across europe and uk just like it has in usa

it went 1st to second to 3rd again in a matter of 3 months the same happened globally except japan were they buy psps so that sums up there thinking (DUMB)SORRY IF I OFFENDED THE WHOLE OF JAPAN with the truth WHO PARTS MONEY FOR PSP SERIOUSLY THAT IS A INTELLIGENT THING TO ASK WHO BUYS THE DAMNED THING.......

PS3 IS BACK IN 3RD PLACE GLOBALLY "GAME" THE UK LEADING GAMING STORE CHANE DOESN'T HAVE SHELVE SPACE FOR PS3ASLIM AND WINDOW ADDS AND PROMOTIONS DON'T INCLUDE PS3 SLIM ONLY X360 ELITES AND WiiS AND BLACK WiiS

THE EXACT SAME WAY THEY TREATED GAMECUBE

WII SHALL LEAD GLOBALLY IN SALES FIRST 3 MONTHS OF 2010 WITH EASE THEN ADD THE CORE GAME FACTOR AND MORE WM+ AND USA GETTING A BLACK Wii

presto ps3 wands release doesnt hurt wii

anyone who even suggests a sony ps3 year HAS ISSUES WITH REALITY

sony are dead in this game and the huge loss continues at sony by the time wands have any impact it will be end 2010 and wii has owned yet another year

the ps3 slim fight back is already over were do these 2010 fantasys come from

i cannot see any Sony fight back in 2010, if any only against its HD-twin not wii and DS the reason the 3rd party games are not there is obvious the industry is retreating from the competition wii and nintendo this is "FLIGHT" as predicted by seam malstrom

wiiboy you CAPS MONSTER i do have to agree with you Sony cannot do a thing to save PlayStation now and the wands are a flop waiting to happen.

to late/look like sex toys/cheap looking/NO ANALOG STICK/light orbs between eyes and tv screen will be a pain/add on with own retail price.

the wands lack a nun-chuck like side kick and analog stick and are not a standard part of the ps3 and its still at least 4 months away its all too little too late

i think there's going to be casualty's in 2010 and 2011 more dead 3rd party's.

okay, the moron who is commenting on sony being an absolute failure is a complete idiot. Keep playing sales for your wii, i'll be busy playing games on my ds/wii/ps2/ps3/psp.

Nintendo fanboys are the absolute worst, always trying to convince themselves that the wii is the best thing available and the only "nex gen" experience. Funny how the big nintendo titles don't do anything revolutionary when it comes to motion controls. Sure WSR has motion+ but it's just a tech demo. The wii at it's best is when it emulates a mouse (fps, world of goo) and even then it's still not as accurate as a mouse.

As for disruption, the only thing the wii is disrupting is it's core fanbase. Everyone has moved on, soccer moms are not gonna be waiting in line for wii2 because they only use the wii for is Wii Sports. Nintendo did the same thing with the snes, they thought they had the market on lock so they were too stubborn to go with a CD-ROM based console and went with the n64. Look what happened, it completely back fired on them. The wii is a joke of a console, plain and simple.

"Nintendo fanboys are the absolute worst, always trying to convince themselves that the wii is the best thing available and the only "nex gen" experience."

And Xbox and Sony fanboys are more open-minded and less deluded. *rolls eyes*

"Everyone has moved on, soccer moms are not gonna be waiting in line for wii2 because they only use the wii for is Wii Sports."

First of all, who is "everyone," and when has there been any official announcement of a Wii 2?

"Nintendo did the same thing with the snes, they thought they had the market on lock so they were too stubborn to go with a CD-ROM based console and went with the n64. Look what happened, it completely back fired on them. The wii is a joke of a console, plain and simple."

So, the N64 outsold the PlayStation and dominated the console market. Yeah, Nintendo is really feeling the pressure. They should really reconsider succeeding, and model their entire business practices from you.

"So, the N64 outsold the PlayStation and dominated the console market. Yeah, Nintendo is really feeling the pressure. They should really reconsider succeeding, and model their entire business practices from you"

What alternate universe are you living in? The psx destroyed the n64.

I love how whenever someone makes complaints about the wii, the fanboys always resort to, "oh ya, nintendo should take business advice from you..." Keep drinking the kool-aid moron.

No one is denying that the wii is absolutely killing the competition in terms of sales. The thing that has yet to be seen is how it will effect nintendo in the long run with their "core" fanbase. Like i said, this has happened to nintendo in the past.

When I said "everyone" has moved on. I meant everyone besides fanboy dumbasses like yourself and soccer moms. I repeat, moms will not be waiting in line on launch day for the next wii. The majority of the wii systems sold are bought because of 1 game, wii sports. If you think this is false, you are a complete idiot.

The wii is a horrible system. The majority of the kids who love it are gamecube generation gamers. It's the first nintendo console, that myself and many others don't enjoy playing, why? It's a gimmick, it's flawed and it's a slap in the face to the people who supported nintendo through the n64 gen and the gamecube gen.

"What alternate universe are you living in? The psx destroyed the n64. "

It's obvious you doesn't understand the concept of sarcasm.

"I love how whenever someone makes complaints about the wii, the fanboys always resort to, "oh ya, nintendo should take business advice from you..." Keep drinking the kool-aid moron."

I love it whenever someone disagrees with someone they call them "fanboys" and project themselves onto someone else because they don't have any arguments other name-calling. You really have shown to be more rational than the fanboys you are arguing against.

"No one is denying that the wii is absolutely killing the competition in terms of sales."

Yet you compared the Wii to the N64, which is why I was sarcastic with you about that comment.

"When I said "everyone" has moved on. I meant everyone besides fanboy dumbasses like yourself and soccer moms. I repeat, moms will not be waiting in line on launch day for the next wii. The majority of the wii systems sold are bought because of 1 game, wii sports. If you think this is false, you are a complete idiot."

Again, how do you know these "soccer moms" won't be waiting in line for the Wii 2 when the system hasn't been announced yet? How can you call me a "dumbass" when I'm not the one making any pre-suppositions and claims. Besides, the Wii doesn't appeal to just "soccer moms," they appeal to a broader range of gamers or potential gamers. While casual games like Wii Sports and Wii Fit have been the driving force behind the sales and profits, Nintendo still has their traditional library (Zelda, Mario) to back them up. That doesn't sound like one game is the reason behind it.

"It's a gimmick, it's flawed and it's a slap in the face to the people who supported nintendo through the n64 gen and the gamecube gen."

Yes, a gimmick that has inspired Microsoft and Sony to create their own motion sensing solutions and attempt to get into the casual market. It's so much like Nintendo sticking with cartridges.

My your a piece of work. Since you are very slow up on the uptake, with you unable to even detect sarcasm when there were glaring clues to suggest it (which you pointed out, but failed to notice anyway), I'll be frank.

Calling me such contrived names like "fanboy" still doesn't validate your claims. It just makes you look more like the fool than me. I apologize if my earlier comments came off as condescending, but you made some outrageous claims that didn't really warrant much serious response.

It doesn't matter what Nintendo's state of mind is because the circumstances are different than they were during the "cartridge vs. CD" days. You may think motion sensing controls are gimmicks, but Nintendo, Sony, and Microsoft don't think so. It sounds like Nintendo's "stubbornness" has paid off this time.

I don't know what the future will hold for Nintendo. Nobody does, not even analysts. And since you've been around during the N64 and GameCube, you should know that Nintendo has been through worst situations than this, so what are you worried about? In fact, do you even remember the GameCube years, which I considered to be Nintendo's rock bottom in the console market? Nintendo virtually had next-to-no third-party support; they were so far behind in the competition, it was laughable; and there was at one point in 2005, no titles were ever released due to lack of third-party support. And you know what the funny thing is, the GameCube didn't have motion sensing controls or other gimmicks. It had peripherals, but it was solely a conventional console: a processing power that rivaled the competition's, a CD drive, and a dual-analog controller. So how do you think Nintendo relying on conventional consoles would work now?

wii is garbage, and its being kept on its perch by gifting parents and brainless nintendo fanboys defending it based on the charms of yesteryear.

fans need to grow a pair and start to decline the sh** that nintendo spoon feeds them, or go down with the boat. the industry is going to be cleaning house real soon, and it pains me both as a logical person and a gamer, that nintendo continues to coast on this dribble while other companies struggle to survive just because they dont have a legion of slaves.

I've owned Nintendo consoles for about 15 years now, but sadly Nintendo has lost my support. I don't think their necessarily lazy, rather they have an understanding of the new market they have. They understand that making a game simple and appealing to a broad demographic rather than complex, challenging or extremely polished is more important. And since the games are selling, they don't have to take another approach. That's fine, I still own a DS. But as far as my support for Nintendo goes, that's about it. PS3 and XBOX 360 are now my consoles of choice.

"wii is garbage, and its being kept on its perch by gifting parents and brainless nintendo fanboys defending it based on the charms of yesteryear.

fans need to grow a pair and start to decline the sh** that nintendo spoon feeds them, or go down with the boat. the industry is going to be cleaning house real soon, and it pains me both as a logical person and a gamer, that nintendo continues to coast on this dribble while other companies struggle to survive just because they dont have a legion of slaves.

this patent discribe, how zelda will work in 3d envirement. so perhaps at the next E3 2010 nintendo will show another add-on

No, it does not. This 2007 patent describes how the camera auto-adjusts when Link is using his bow (most likely when on horseback and such). I would not be surprised if this relates to Twilight Princess already. Thanks for the heads-up, though.

You will understand that I am not going to comment on the polemic and ill-informed dribble other people have posted here.

new "bildschirmtechnik" could hinta 3d-way.... and i think sincethe ces some days ago, where 3d was a big theme for tvs, it would make sense....

what do you think about?

my guess is, that nintendo will offer us an 3d-on for wii, with it, no more need for tv.a screen, where objects could be shown in a new 3d way, a hmd, or an display without need to wear glasses ( like for example: http://www.poc.com/emerging_products/3d_display/default.asp )

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